Plan your business finances

Setting up and managing finances is essential to the success of your small business. You can learn about basic financial processes, planning for good financial management and discover what financial policies you need to be aware of.

Basic financial requirements

Work with your accountant or financial adviser for tailored recommendations and advice on how to set up finances for your business type or industry.

Start-up costs

Pricing for products and services

Income and profit

Simon Dell, Mentoring for Growth mentor and CEO of Cemoh, provides practical advice for building a strong business foundation, from setting a clear vision to mastering your digital presence. Receive tips on monitoring your cash flow, identifying your target market, and using your website and digital promotion to drive sustainable growth.

  • [Simon Dell, CEO, Cemoh]

    My name is Simon Dell. I am the CEO of Cemoh.

    We are Australia's largest fractional marketing network and I've been lucky enough to be a mentor for the Mentoring for Growth program for the Queensland Government for about 8 years.

    I'm going to share some ideas and some tips for you when it comes to planning your business for the next 12 months.

    A key part of business planning is to understand your numbers.

    There are about 5 or 6 different numbers that really are important to your business and that you should know on a month-to-month basis.

    Yes, your revenue and your profit are really important, but one of the key drivers is cash.

    How much cash is in your business? How much cash is in your bank account? How much cash is owed to you?

    Cash is the survival mechanism of every business. And understanding how much you have and how much you're owed is really important.

    It's also important to keep an eye on things like expenses: How much things are costing you to buy, all the things that drive that bottom line of the business.

    And those things can fluctuate month-to-month. So, it's important that every month you go back and have a look at the numbers and understand the health of your business from what is on the bottom line.

    Another key part of planning your business is to understand your target market.

    Not every business can advertise or appeal to every particular customer.

    There are certain different things that drive the purchase behaviour of a 25 year-old woman versus a 50 year-old man.

    And it's really important to understand what information these people want, where they're getting their information from, and how you can communicate to them in a way that makes them want to purchase from you.

    Another key part of planning your business is the digital aspect of your business.

    At the end of the day, irrespective of where you advertise and where you communicate for your customers, a lot of people always go back to the website as the centre point for where they want to find information from, from a customer.

    Make your website really easy to navigate. Make it look good. Use lots of pictures. Use lots of helpful text and headlines.

    Whatever you do from a digital perspective, whether it's social media or Google ads or search engine optimisation or even more traditional advertising like billboards or the side of a bus or flyers out somewhere, everything will always come back to the website.

    One of the other pieces of advice I like to talk about is for businesses to understand the sales funnel. And the first step in the sales funnel is making more people find out about your business.

    And if you're not doing anything to drive more people to find out what you do, what you offer, and who you are, you need to have a serious think about how you go out there and connect with potential new customers.

    Often a lot of businesses get very complacent and are happy with the existing customers or word-of-mouth. And word-of-mouth is a really important driver when it comes to business.

    But from a growth perspective, you cannot rely on word-of-mouth alone.

    Have a think about other ways that you can get your business out there and new customers can find out about what you do.

    And don't forget, you can go to the Business Queensland website for all the support and information that you need.

Watch video
- duration of 3:22

Banking options

There are many banking options available, each with advantages and disadvantages, to suit different types of businesses.

  • A transaction banking product provides day-to-day banking facilities accessible online.

    This option is suitable for a wide range of business types ranging from sole traders to larger companies. Any company that deals with cash or invoices can benefit from a transaction banking product.

    Advantages

    Most transaction products will provide:

    • cash availability at ATMs
    • EFT payments online
    • same-day payments
    • accounting software linking.

    Some products will provide:

    • free accounts for limited transactions
    • debit cards
    • lines of credit
    • overdrafts.

    Disadvantages

    Transaction banking products often have associated fees that increase with increased levels of transactions.

  • Merchant facilities are the services that allow businesses to accept credit and debit card payments. They include EFTPOS terminals and online banking options.

    This option is suitable for any business requiring on-the-spot payments (e.g. retail markets or cafes).

    Advantages

    Merchant facilities allow:

    • greater flexibility for customers
    • contactless payments
    • simple or differential rates for different types of card transaction
    • different merchant facilities (e.g. EFTPOS terminals, handheld or tablet-based devices).

    Disadvantages

    Merchant facilities:

    • can have high costs (often higher if payments are processed online)
    • generally do not accept all cards
    • may only settle accounts once per day
    • rely on internet reliability to operate
    • have cost associated with servicing machines.

  • Debtor finance allows your business to overcome cash-flow issues. These facilities give your business access to a percentage of customer invoice amounts before the customer is due to pay under normal business terms.

    This option is suitable for businesses that have long payment terms on their invoices (e.g. 30, 60, or 90 days) or for larger and more established businesses requiring early access to funds.

    Advantages

    Debtor facility finance provides businesses with:

    • a short-term cash solution
    • access to 80% of the value of an invoice within 24 hours
    • an online dashboard.

    Disadvantages

    Disadvantages can include:

    • only available to businesses that have been trading for at least 12 months
    • not all customer invoices are eligible
    • cost of service fees.

  • Credit cards provide businesses with access to a line of credit issued by a bank that must be paid off later.

    This option is suitable for businesses that have a short-term need for funds to make purchases while they wait for income.

    Advantages

    Business credit cards provide:

    • access to a line of credit that a business might otherwise not have
    • a period of no interest.

    Disadvantages

    Credit cards will typically have high interest rates after the no interest period. They also come with annual fees.

  • BPAY is a method of transferring funds online from a bank to a registered biller. The transfers can be one-off or scheduled.

    This option is suitable for any business that regularly bills customers or accepts part payments, and for businesses wanting to provide a no fee, no credit card option to customers.

    Advantages

    Using BPAY:

    • enables a no fee, no credit card option for customer payments
    • allows businesses to choose the timing of their payment
    • provides a trusted payment method
    • creates unique customer reference numbers and codes for financial reconciliation
    • provides a secure platform for electronic funds transfer.

    Disadvantages

    The disadvantages of BPAY include:

    • some transfers may be difficult to refund
    • transfers may not be immediate
    • establishing costs
    • transaction fees.

Managing your own finances

You can learn basic skills as a small business owner to give you confidence to manage your own finances. These skills will help you:

  • understand accounting basics
  • be confident in financial terms
  • interpret financial statements
  • identify how cash flows through a business
  • understand cost of goods sold
  • use financial information to make business decisions.

Skills such as budgeting, calculating taxes, setting price points and setting revenue and success rates will give you control over your own financial decisions.

Tips

Remember to clearly separate your business finances from your personal finances and accounts.

  • Putting together a budget can be as simple as creating a spreadsheet. At the end of every month, compare your actual spending to your budget. If it doesn't match, review where your money was spent and make adjustments for next month.

    Learn more about budgeting.

  • Expenses are things you have to pay for to run your business, such as overheads (e.g. rent, electricity) and employee salaries.

    Understanding your expenses can save you money when applying for a loan or negotiating deals with suppliers.

    Learn about the costs to start and run your business.

  • Cash flow is how money moves in and out of your business. You can track your cash flow on a simple spreadsheet or in your accounting software. Small businesses starting out may have dramatic changes in income and expenses each month.

    Record every purchase, withdrawal, cost and sale in your spreadsheet or accounting software. This will help you understand:

    • where your money is going
    • your highest expenses
    • your most profitable products
    • high revenue months or periods
    • what an average month looks like.

    Learn more about managing your cash flow.

  • Before borrowing money, compare terms, interest and fees from multiple lenders using an online comparison service or a broker. Read the fine print and understand the loan's limitations and requirements.

    Find options for funding your business.

  • Your personal credit rating can affect your ability to apply for business loans and credit.

    Speak to your accountant or financial adviser for more information on managing your credit rating.

Improve your financial knowledge

Grow your financial knowledge to help you better understand how to run your business. You could:

Further training

Use the Queensland Skills Gateway to find available training courses in Queensland.

Financial policies and procedures

Financial policies set out the 'rules' for how you will manage your business's finances. They should reflect the core values and culture of your business.

Clear financial policies and procedures will ensure:

  • staff are aware of their obligations
  • financial decisions are consistent and reliable
  • client or employee disputes are less likely
  • professional operating standards are in place.

Types of financial policies and procedures

Your policies and procedures will depend on the nature of your business. Think about your preferences for:

  • who you will authorise to complete specific tasks
  • cash handling and managing your business's day-to-day finances, such as petty cash and invoicing
  • how you will choose and work with new suppliers
  • buying and purchasing processes such as stocktake and purchase orders
  • overdue invoices or accounts payable (creditors)
  • sales and accounts receivable (debtors)
  • engaging and managing customers or clients
  • processing wages, sick leave and overtime
  • business insurance and risk management.

Creating financial policies

Financial policies should:

  • align with your business plan and goals
  • reflect the values and the culture of your business
  • explain why policies have been put in place
  • be easily understood by everyone in your business.

Creating financial procedures

Financial procedures set out clear instructions under a policy and should:

  • be factual, informative and detailed
  • be presented simply using clear instructions and visual supports such as flow charts, images and checklists
  • include references and links to forms.

When writing your financial policies and procedures:

  • highlight your objectives
  • involve your employees in the decisions
  • write and review each day, or as you complete tasks, to keep manageable.

Also consider...